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5.2. Financing liabilities

Accounting policies

The Group’s financing liabilities are classified under three main categories: bank borrowings, debt securities and other financing liabilities (including chiefly finance lease liabilities and non-bank borrowings). On initial recognition, all financing liability categories are measured at fair value less transaction costs. As at the reporting date, financing liabilities are measured at amortised cost with the use of the effective interest rate method.

2016 In functional currency – PLN In foreign currency
EUR USD
Bank borrowings 36 715 572
Debt securities 2,698 2,286
Other 9 36
Total, including: 2,743 3,001 608
 floating-rate 2,739 715 608
fixed-rate 4 2,286
2015 In functional currency – PLN In foreign currency
EUR USD
Bank borrowings 203 747 574
Debt securities 2,579 2,193
Other 33 1 52
Total, including: 2,815 2,941 626
 floating-rate 2,813 748 626
fixed-rate 2 2,193

Interest on floating-rate debt denominated in the Polish złoty is calculated based on 1M WIBOR, 3M WIBOR or 6M WIBOR rates; USD-denominated debt: 1M LIBOR and 3M LIBOR rates; EUR-denominated debt: EONIA, 1M EURIBOR and 3M EURIBOR rates. Fixed interest rate is applicable only to EUR-denominated debt securities and stands at 4%. The Group’s debt is subject to interest rate risk, currency risk and liquidity risk. For detailed information on these risks, see Note 7.3.

As at December 31st 2016, the Company operated the following debt security issue programmes:

Outstanding debt (PLNbn)
Issue agreement date Agreement valid until Subject matter Banks participating in the issue as at the reporting date Issue limit Utilisation (%) as at
Dec 31 2016
2016 2015
Authorised issuer: PGNiG S.A
Jun 10
2010
Jul 31
2020
Note issuance programme for short-term discount notes and coupon-bearing notes with maturities from one to twelve months Bank Pekao S.A., ING Bank Śląski S.A., PKO BP S.A., Bank Handlowy w Warszawie S.A., Societe Generale S.A., BGŻ BNP Paribas S.A. Oddział w Polsce, mBank S.A. and Bank Zachodni WBK S.A. PLN 7bn
May 22
2012
May 22
2027
Note issuance programme Bank Pekao S.A. and ING Bank Śląski S.A. PLN 4.5bn 55.6% 2.5 2.5
Oct 2
2014
Sep 30
2024
Note issuance programme for notes with maturities of at least 12 months1 Bank Gospodarstwa Krajowego PLN 1bn
Authorised issuers: PGNiG S.A. i PGNiG Finance AB
Aug 25
2011
Feb 14
2017
Euro medium-term note programme (notes with maturities of up to ten years) Societe Generale S.A., BGŻ BNP Paribas S.A. and Unicredit Bank AG EUR 1.2bn 41.6% 2.2 2. 1
Authorised issuers: PGNiG TERMIKA S.A.
Jul 4
2012
Dec 29
20192
Note issuance programme for coupon-bearing notes or discount notes ING Bank Śląski S.A., PKO Bank Polski S.A., Nordea Bank Polska S.A. and Bank Zachodni WBK S.A. PLN 1.5bn 0.1
Authorised issuers: Spółka Energetyczna „Jastrzębie” S.A.
Oct 17
2013
Dec 20
20173Sep 20
20173
Note issuance programme Bank Gospodarstwa Krajowego, Alior Bank S.A. PLN 0.42bn 4.8% 0.2

1. In accordance with the agreement, the note issue proceeds may only be used to finance capital expenditure, including on maintaining producing capacities, diversification of gas supply sources, oil and gas exploration and appraisal, development of the power segment and ongoing projects involving the construction of storage infrastructure.

2. May be extended until December 29th 2021

3. The Programme provides for multiple note issues in two tranches:

– Tranche A, worth up to PLN 369m, with proceeds allocated to the financing of the Investment Programme, including by transferring the proceeds to the issuer’s group companies carrying out the Investment Programme, and to the refinancing of capital expenditure incurred by the issuer or its group companies to carry out the Investment Programme;

– Tranche B, worth up to PLN 51m, with proceeds allocated to the financing of the objectives of Tranche A and working capital needs (including redemption of Tranche B notes).

As at December 31st 2016, fair value of the liability under Eurobonds issued by PGNiG Finance A.B. was PLN 2,224.8m, and its carrying amount was PLN 2,286.4m (December 31st 2015: PLN 2,204m, carrying amount at PLN 2,193.2m). The fair value was classified as Level 1 of the fair value hierarchy, and was determined based on market prices of the Eurobonds.

As at December 31st 2016 and December 31st 2015, the fair value of the Company’s other financial assets and liabilities measured at amortised cost did not materially differ from their carrying amounts.

Financing liabilities of PLN 3,029m (2015: PLN 1,390m) are secured with property, plant and equipment with a carrying amount of PLN 6,965m (2015: PLN 3,994m).

In the current and comparative periods, the Group repaid its financing liabilities in a timely manner. In the reporting period and as at the date of authorisation of these financial statements for issue, there were no instances of default under material provisions of any credit facility, loan, or debt securities issue agreement that could trigger accelerated repayment.